Legendary stock-picker Cathie Wood has hailed Artificial Intelligence (AI) as the “next big frontier” of technology. She believes that AI could have a market opportunity of a whopping $80 trillion within the next decade. Hence, AI stocks are likely to be among the biggest gainers in the stock market in the foreseeable future.
The future of AI is more than just a Hollywood plot twist; it’s an everyday reality for people all over the globe. AI is a complex system in which humans and computers interact to make smarter decisions. The applications of AI can be seen everywhere, from social media platforms that give us more insight into the personal lives we follow or search engines which use algorithms to determine user preferences. AI is even pertinent in enterprise-level software such as accounting systems with machine learning capabilities for data analysis.
Having said that, let’s look at three of the more promising AI stocks in the market poised for massive gains in the future:
AI Stocks to Buy: C3.ai (AI)
C3.ai is an enterprise AI firm that provides clients with a wide range of applications through its robust software-as-a-service (SaaS) model. Its broad application suite allows its users to accelerate AI transformations. Its tailored applications enable its clients to perform data analysis, risk management, optimization, and other tasks. According to estimates, the AI platform is expected to grow its top line by over 33% in the next three years.
Moreover, the rising AI adoption among different sectors will provide a lasting tailwind for the company and AI stock.
The company reported its first-quarter results in September, where we saw its revenues shot up 30% from the prior-year quarter to $52.4 million. Moreover, subscription sales rose 29% to $46 million. C3.ai is currently operating at a much smaller scale concerning its customer base. Gross margins are more than 75%, and if the platform achieves scale, it could achieve margins of over 85%. Though the company is in its early innings, the scalability and applicability of its solutions to virtually every industry make it a long-term winner.
Upstart is a disruptor that uses its proprietary AI algorithm to refine lending practices effectively. The platform has proven to be highly efficient in connecting banks and individuals with a 26% higher loan approval rate than the conventional model. Moreover, it also lowers the average borrower’s rate by 10% and the platform is applicable to all credit markets.
The company recently posted its impressive third-quarter results, which showed a massive improvement across both lines. Its third-quarter revenues came in at $228 million, representing a 250% improvement from the prior year. Moreover, its net income of $29.1 million was also a 201% improvement from the same period last year.
More importantly, Upstart comfortably beat analyst estimates for both revenue and earnings, maintaining its positive track record. UPST stock has performed sluggishly in the past few months, but I expect the stock to perform well in the long run.
AI Stocks to Buy: Splunk (SPLK)
Splunk is a software platform that focuses on data analysis in generating valuable insights for its users. It can analyze vast amounts of complex information and enable enterprises to take action against potential pitfalls. Moreover, its enterprise solution can be used for various-use cases, including app and security management. The company has successfully achieved its cloud-first strategy and is now able to perform at a healthy pace for the foreseeable future.
The company recently announced its preliminary third-quarter results, where revenues rose 19% from the prior-year period to $660 million. Cloud annual recurring revenues shot up to $1.1 billion, rising 75% from the same period last year. It’s the third straight quarter where the company’s top line has improved by double digits from the prior-year period.
Looking ahead, SPLK stock has an incredible growth runway ahead as it continues to gain traction across different sectors.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.